Supreme Court narrows bankruptcy judge jurisdiction

[JURIST] The US Supreme Court [official website] on Thursday voted 5-4 to affirm [opinion, PDF] the lower court in Stern v. Marshall [Cornell LII backgrounder; JURIST report], agreeing that the bankruptcy court did not have jurisdiction in this instance. The opinion, delivered by Chief Justice John Roberts, explained that the bankruptcy court judge has a limited role beyond bankruptcy's core proceedings, even as defined in 28 USC § 157(b)(2)(C) [text], and found the core proceeding listed in this case unconstitutional. Although one of the core proceedings is counterclaims, and the court found there was a statutory basis for the decision, they found that portion of the statute unconstitutional under Article III [text]. Since bankruptcy judges do not enjoy the tenure or salary stated under Article III, the Court ruled they cannot go beyond bankruptcy proceedings.

We recognize that there may be instances in which the distinction between public and private rights—at least as framed by some of our recent cases—fails to provide concrete guidance as to whether, for example, a particular agency can adjudicate legal issues under a substantive regulatory scheme. Given the extent to which this case is so markedly distinct from the agency cases discussing the public rights exception in the context of such a regime, however, we do not in this opinion express any view on how the doctrine might apply in that different context. What is plain here is that this case involves the most prototypical exercise of judicial power: the entry of a final, binding judgment by a court with broad substantive jurisdiction, on a common law cause of action, when the action neither derives from nor depends upon any agency regulatory regime. If such an exercise of judicial power may nonetheless be taken from the Article III Judiciary simply by deeming it part of some amorphous "public right," then Article III would be transformed from the guardian of individual liberty and separation of powers we have long recognized into mere wishful thinking.
Justice Antonin Scalia concurred in the opinion, stating that he believes "an Article III judge is required in all federal adjudications, unless there is a firmly established historical practice to the contrary," rather than the "public right" analysis Roberts utilized. Justice Stephen Breyer dissented, stating he believed the statute was constitutional.

The case involved deceased model Anna Nicole Smith's (Vickie Lynn Marshall) bankruptcy proceedings. The beneficiary of her late husband's estate, Pierce Marshall, attempted to collect as a creditor in her bankruptcy, claiming defamation. She filed a counterclaim for tortious interference in the gift her late husband, J. Howard Marshall, had attempted to bequeath her, to try and recover the $88 million that had been denied to her in prior estate proceedings. The US Court of the Appeals for the Ninth Circuit held [opinion, PDF] that the bankruptcy court exceeded its jurisdiction in ruling on the case. The case had returned to the Ninth Circuit after the Supreme Court's 2006 ruling in Marshall v. Marshall [Duke Law backgrounder; JURIST report] that federal courts can in some cases decide disputes which involve state probate laws.

 

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